Regular annuity payments - repay on death?

OnlyMe_08

Not familiar with this, would it be expected for a company to request overpayments of annuity payments if the person has passed?

What are annuity pensions and what are implications on death of policy holder?

dunstonh

would it be expected for a company to request overpayments of annuity payments if the person has passed?

Yes. The estate will be obliged to repay the overpayment before distributing to the beneficiaries.

Think of it logically, if they didnt have to repay it, then people wouldnt notify providers of date of death and would try and get away with it as long as possible.

What are annuity pensions and what are implications on death of policy holder?

When the annuity is bought, the person has a choice of the options on death. For example, with or without proportion. With proportion will pay pro-rata in the month of death. Without proportion will only pay on full months. Guarantee periods or value protection will also impact on methods.

OnlyMe_08

Thanks Donstonh

Is there always an amount due to be paid to a beneficiary from the policy, as a result of death of the policy holder?

Sorry for asking, not familiar with annuity pensions at all.

dunstonh

Is there always an amount due to be paid to a beneficiary from the policy, as a result of death of the policy holder?

With an annuity, it would depend on the death options chosen at the outset. With no guarantee period or other death benefit included, it would just end on death with no further payments.

Sorry for asking, not familiar with annuity pensions at all.

Its probably better to drop the word pension from your questions. Pensions are what get you to retirement. The annuity is one of the options you buy at retirement to provide the income. It is effectively two different products. Pensions have different death benefits to annuities.

GhIFA

It will depend how the annuity is set up - whether there are any dependants (according to the provider's criteria) and whether a pension for them was built into the annuity when it was set up, any guarantees etc.

Also, if it was set up as a value-protected annuity then there may possibly be a lump sum to pay out - The value of this would depend on the original purchase price, the income paid to date, and a tax charge that would then be due.

To get the answers to your questions you will need to speak to the annuity provider.

SallyG

Can you suggest the possible range of definitions of "dependant" on the death of an annuitant?
Will it always be about financial dependency or for an annuity with a "10 year guarantee" is it simply a matter of naming a beneficiary?
Will the annuity provider always/mostly challenge payments to a named beneficiary under a guaranteed annuity?
For a lump sum payment will the tax take be 55% as for remnants of drawdown ?

GhIFA

SallyG wrote: »

Can you suggest the possible range of definitions of "dependant" on the death of an annuitant?
Will it always be about financial dependency or for an annuity with a "10 year guarantee" is it simply a matter of naming a beneficiary?
Will the annuity provider always/mostly challenge payments to a named beneficiary under a guaranteed annuity?
For a lump sum payment will the tax take be 55% as for remnants of drawdown ?

Normally spouse and/or children. If there is no spouse, and only child dependants then broadly speaking they would only be deemed as dependant until age 23, unless they would be considered to be "permanently" dependant due to reasons of physical/mental impairment. There are some other circumstances where dependancy may go on beyond 23, but they require very specific circumstances.

Yes, by it's nature the definition of dependant under an annuity is a financial dependant. I don't quite understand the rest of the 2nd question - a dependant's benefit must be set up at outset, on death of the annuitant then the pension will pay for the rest of the dependant's life where appropriate (i.e. spouse or impaired child etc). The guarantee period refers to how long the annuitant's original pension will be paid i.e on a 10yr guarantee, the full pension will be paid for 10 years before reducing to the dependant's pension, even if the annuitant dies in year 1.

I've never known a dependant be challenged by the provider - although in most circumstances it is the spouse. I guess where it may potentially be debated is around an impaired dependant, or a child over 23 who may fall into some of the more specific circumstances regarding full time education.

On a value protected annuity, the tax charge on the lump sum benefit (purchase price - income paid) will be 55%.